Introduction
The contracts of Leases in Egyptian and French law
The contract « pacta sunt servanda », the contract with all these kinds, has a great importance in a society. Before we talk about contracts of Leases in Egyptian and French law, let’s get to the definition of lease contracts in Egyptian and French law.
First, in Egyptian law: the contract in law is an acceptance link and the parties to the contract agree in order to prove its effect on the contract. It is also defined as the agreement issued by one contractor upon acceptance of the other. Each party is understood in a manner that proves its effect on the contract and implies an obligation of the other party. According to article 89: "The contract is concluded as soon as the parties have exchanged the expression of identical intentions, taking into account the special conditions provided for by law for the conclusion of the contract." And we have some types of contracts, for example: contracts that fall on property or fall on profit, such as rent.
Contracts in French law: according to article 1101, a contract is an agreement between two or more persons to create, modify, transfer or cancel obligations. And there are several types of contracts: employment contract, lease contract.
After determining the definition of contract in Egyptian and French law, we will specifically discuss lease contracts in Egyptian and French law. As defined in the Egyptian law pursuant to Law 4 of 1996, Article 558 of the Egyptian Civil Code, the lease agreement is an agreement between two parties, known as the lessor and lessee, whereby the lessor is required to give a property to the lessee for use in exchange for payment of an agreed rent. A lease is a binding contract that determines the rights and obligations between the parties. But in the French civil code, according to article 1709 a lease contract is that one party is obliged to make something enjoy to the other party for a certain period and pay a certain price. All types of movable or immovable property may be leased in accordance with article 1713 of the Civil Code. The property may be rented either in writing or orally, except for the application of specific rules to farms and sharing of leases relating to rural property pursuant to article 1714 of the French Civil Code.
After knowing the definition of lease contracts in the new Egyptian and French laws, we have a question: do these new laws have a retroactive effect on the old lease contracts (under the old law and concluded before the new law came into force)?
Under French law, the new lease law does not generally have retroactive effect on old leases. This means that leases entered into before the reform comes into force are still valid under the same rules as at the time of their signature (the contract is in principle governed by the law in force at the time of its conclusion) "The law only provides for the future and has no retroactive effect" (article 2 of the Civil Code), as explained by the Court of Cassation in its 2014 report on the contract "Theory of legal effects". However, there is an exception in the case of interpretation and ratification laws because they are of public interest and controlled by the Constitutional Council. In case of inheritance in housing leases under the French law no 89-462 of 6 July 1989, the lease shall not be transferred to the heirs of the deceased tenant and may only be transferred to beneficiaries designated by law in accordance with Article 14 of the aforementioned Law No 89. This is different from Egyptian law since the old lease contract is inherited to the heirs and the lease contract does not end with the death of the lessee or lessor, as stipulated in the old and new lease law, which is enacted in the provisions of Civil Code 4 of 1996. This is the difference between Egyptian and French residential tenancy laws since there is no retroactive effect on old residential leases in Egypt.
Causes et Objectives of the reform
Before the reform of the rental contract in France, several weak points were often criticized concerning:
1. The duration and renewal: Fixed-term leases could pose renewal problems, especially for tenants who wanted to stay in their dwelling.
2. The rent increases: The rules for rent revisions were not always clear, leaving room for excessive increases.
3. The tenant rights: The rights of tenants were sometimes poorly defined, making it difficult to challenge leave or rent increases that are considered abusive.
4. The status of the site: The procedures for the status of the site were not always strictly applied, which could lead to disputes when returning the security deposit.
5. The protection against evictions: Eviction procedures were deemed too fast and lacked adequate protections for tenants in difficulty.
6. The maintenance obligations: Maintenance and repair obligations were not always clearly defined, which could lead to disagreements between owners and tenants.
7. The informality of agreements: Some lease contracts were drawn up informally, without meeting legal requirements, which could pose problems in case of litigation.
8. The lack of solidarity between co-ownerships: In co-location leases, the solidarity of the co-ownerships was not always clearly defined, which could create disagreements in case of non-payment.
These points have contributed to a need for reform to strengthen tenant rights and clarify landlord obligations.
While the weaknesses of pre-reform leases in Egypt and France are somewhat similar, there are also significant differences due to the specific legal, economic and social context of each country.
These differences are:
Regulation and formality: In France, rental contracts are generally more regulated by law, with clear regulations on the duration, renewal and rent increases. In Egypt, many leases were informal and poorly regulated.
Rental term: In Egypt, long-term rentals were common and could pose flexibility problems. In France, although fixed-term leases are common, the minimum duration is often better defined.
Maintenance and owner’s obligations: In France, maintenance obligations are often better specified in the law. In Egypt, these obligations were sometimes neglected, resulting in housing problems that deteriorated.
Eviction procedures: Eviction procedures in Egypt were often judged to be faster and less protective for tenants, while in France, although criticized, they enjoyed stronger legal protections.
Economic context: The rental market in Egypt is often more informal and less regulated than that of France, influencing how leases are established and respected.
In France:
The reform introduced by decree no. 2023-803 of August 18, 2023, comes in a context where real estate prices are constantly rising, and a large part of the French population finds housing increasingly inaccessible. Landlords have always been placed in a far more favorable situation than tenants, creating an unequal contractual situation. To address these difficulties, the government is attempting to implement measures aimed at facilitating access to property ownership while reducing expenses for households.
The main objective of this legislative reform is to separate land from buildings, that is, to distinguish the value of the land on which a home is situated from that of the property itself. The goal is therefore to reduce the acquisition costs of housing for individuals and to promote sustainable, environmentally friendly construction.
In other words, the reform aims to improve administrative control over real estate transactions and the tax obligations of landlords, while strengthening the protection of tenants by giving them more transparent and clearer access to essential housing information. This will greatly reinforce the fight against certain abusive practices by some landlords, such as the non-declaration of rented properties or the failure to carry out necessary energy renovation work.
The reform is also motivated by environmental goals, particularly the fight against energy-inefficient housing and the promotion of energy renovation. As a result, rental contracts will be modernized. These changes primarily aim to enhance transparency for tenants and facilitate administrative control over rental management, particularly in terms of fiscal and energy compliance.
Impact and consequences of reform on the market
In France:
In recent years, lease contracts in France have borne witness to the reforms and new laws that have left an impact on this type of contract, notably the law for Access to Housing and Renovated Urbanism, known as the Alur law, was brought to parliament in 2014 by former housing minister Cécile Duflot. In addition to urban planning considerations, this law aims in particular to better regulate tenant-landlord relations and offer better protection for tenants. The Law on the Evolution housing, planning and digital technology was enacted in November 2018. It includes a large number of articles concerning incentives for the construction of new housing, the simplification of certain standards, the protection of the most fragile and the latest reform issued by decree number 2023-796 of August 18, 2023, effective January 2024, imposes several new obligations related to the energy performance of housing. The mentioned Decree introduces several important modifications to residential rental contracts, both for unfurnished and furnished properties, with strengthened obligations.
Impact on different types of leases
a) Residential leases
Dwellings used as primary residences are mainly concerned by residential leases. The latest reforms, such as those introduced by the ALUR and ELAN laws, aim to guarantee tenant protection while ensuring a certain balance with landlords.
- Rent controls: Rent controls have been introduced in certain high-stress areas to restrict excessive rent increases. This mechanism prohibits landlords from increasing rents above a given ceiling, when renting a new property or renewing a lease. This has a direct impact on investors and landlords, who are faced with a limitation on their room for maneuver when it comes to rental profitability.
- Advance notice and termination terms: In tight areas, tenants have the option of giving shorter notice - 1 month instead of 3 - which allows them to be more flexible. Landlords, on the other hand, are obliged to give longer notice in the event of repossession of the property for personal reasons or sale.
- Rent guarantee law: A universal guarantee of rents had also been created by the ALUR law to cover unpaid rent, although this was not implemented under the original conditions. However, there are similar private schemes that offer landlords greater protection.
b) Commercial leases
Recent reforms have clarified the parties' obligations under commercial leases and made relations between lessors and lessees more equitable.
- Rent review: Indexation or rent review clauses are frequently included in commercial contracts. Restrictions have been introduced by law to protect merchants against abusive increases when renewing leases. For example, rent adjustments are limited to the commercial rent index, which restricts sudden increases.
- Lease renewal: Reforms have made renewal procedures easier for retail tenants, guaranteeing them a degree of security. A merchant has the right to renew, unless the landlord has serious reasons to justify taking over.
Housing Tax Identification Number
From now on, the rental contract must include the tax identification number of the property. This will give the administration better visibility on whether landlords are complying with their tax obligations. Failure to declare this number could expose the landlord to a fine.
Increased protection for tenants
- Protection against eviction: Protection against eviction is also reinforced by current laws, particularly for vulnerable people During the winter truce period, from November 1 to March 31, tenants cannot be evicted, for example the elderly, families with children and people with disabilities.
- Right of pre-emption: In certain cases, tenants have a right of pre-emption when a property is sold, giving them priority in the purchase of the property.
Tenants also benefit from rent control and reduced notice periods.
New obligations for lessors
- Diagnostic obligations: Landlords are required to carry out a number of mandatory diagnostics before signing a lease, e.g. energy performance, lead, asbestos, etc. The aim of these diagnostics is to provide tenants with comprehensive information on the state of the property before they commit to a lease.
- Maintenance and renovation work: Reforms are putting increased pressure on landlords to keep their properties in perfect condition. It is imperative that landlords carry out work to ensure the health and safety of the property, on pain of fines or penalties.
Obligations to renovate energy
The main impact of the mentioned decree concerns criteria for the energy performance of rented accommodation. The reform removes a clause related to the old energy performance diagnostic (DPE), which became obsolete after the 2021 "Climate and Resilience" law. However, the legislation maintains certain exceptions related to energy renovation work, although these are no longer required to be mentioned in the lease.
From 2025, it will be mandatory to directly include the energy class (DPE) of the property in the lease. This aims to strengthen transparency and the enforceability of this information for tenants. This means that homes considered to be "heatwaves" will have to be renovated to meet these thresholds, otherwise they will no longer be able to be rented out. This obligation imposes a financial constraint on landlords to undertake costly work.
Impact on the calculation of rents
The decree also modifies the method for calculating living space, by including elements such as heated verandas in this area. This can have a direct impact on rents, as landlords have the option of recalculating the surface area of their properties in order to adapt the rent to the new surface area.
Legal protection for owners of condominiums
Measures have been put in place to protect owners of buildings subject to co-ownership status. If they can prove that they were unable to carry out the work required to meet energy standards due to architectural or common-area constraints, owners will not be obliged to do so, thus avoiding penalties.
Since the 2019 Finance Law, landlords must declare the real estate status of their properties annually, under penalty of a fine (€150 per unit in the event of non-declaration or inaccuracy). In co-owned properties, each unit (apartment, parking space, cellar, etc.) is concerned.
Effects on the rental market
These new obligations have a number of consequences. On the one hand, they could reduce the availability of housing in the short term, as some owners will be more inclined to sell their properties than to assume the cost of the work required to meet the new energy demands. On the other hand, they could prevent some investors from investing in the rental sector, which could increase tensions in regions where demand for housing is high.
In Egypt
The old rental system in Egypt is governed by legislation that has been in place for over a decade. The current rental relationship is regulated by Law No. 52 of 1969, which prohibits increasing rental values and grants tenants the right to transfer their lease contracts to heirs. This has led to numerous conflicts between landlords and tenants.
Ihab Mansour, head of the parliamentary body of the Egyptian Social Democratic Party in the House of Representatives, believes that amending the old rental law presents several challenges, particularly the inheritance of lease contracts. This has resulted in many vacant and closed properties, negatively impacting the real estate market. Once the relationship between landlords and tenants is liberalized, more than one million housing units will be made available on the market, which would lower current rental prices. However, consideration must be given to retirees living in rented units under the existing rental law. The solution to the crisis of the old rental law must be implemented gradually over several years, rather than through a drastic approach, in order to maintain a balance between the interests of landlords and tenants.
Many are seeking clarification regarding both the new and old rental laws and the latest developments related to them. These laws have undergone numerous amendments, affecting residential, commercial, and administrative units alike.
→How has the new tenancy law affected landlords, tenants and rental property?
Under the old rental law, many landlords were disadvantaged as it allowed tenants to indefinitely retain rented properties and pass them on to their children for a nominal rent.
Meanwhile, landlords often faced difficulties finding housing for their own families, as they were unable to evict tenants or their heirs. The new rental laws mark a significant shift, aiming to balance the rights of both landlords and tenants. These laws now enable landlords to receive a fair rent and stipulate a fixed lease duration in the contract, preventing tenants from occupying the property for life as was previously the case.
→What is the deadline set in accordance with the amendments to the new lease law and what are the consequences?
The new rental law, enacted in 1996, grants contractual freedom to both landlords and tenants concerning the lease duration. The lease expires at the end of the period specified in the contract, and this period can be renewed if both parties agree.
According to the new rental laws, if the lease duration is not specified in the contract, the lease is considered valid for the rent payment period, and if either party wishes to terminate the contract, they must notify the other party.
→What is the rental value of the new lease law?
The new rental law not only liberalizes the lease duration but also allows the rental value to be mutually agreed upon by the landlord and tenant and recorded in the contract. This value can also be subject to an annual increase as agreed by both parties.
Regarding non-residential units, in accordance with Law No. 14 of 2001, the annual compounded rent increase is set at 1% or 2%, depending on the date the unit was established.
→What is the duration of the new lease?
According to Article 559 of the Civil Code, the lease duration under the new rental law is limited to 3 years, and any extension beyond that must be done with the knowledge and approval of the competent judicial authority.
→When will the old rent law be repealed?
Due to recent amendments to the old rental law, a timeline has been set for terminating the rental relationship between the landlord and the tenant for non-residential purposes. Under this law, all rented units are subject to an annual increase, as previously mentioned, until 2027.
The recent reform of rental contracts in Egypt has significant implications for the real estate market, particularly in response to the rental crisis affecting both landlords and tenants.
A new law enacted in 2024 aims to revise the old lease agreements that often-left vacant apartments tied up, preventing landlords from fully utilizing their properties. The primary objective is to address the issue of unoccupied housing by allowing landlords to reclaim their assets while balancing the rights of both tenants and landlords. This change is expected to facilitate the rental market and increase the available supply, especially for units that had remained stagnant under outdated contracts, often at very low rents.
This reform is part of a wider framework aimed at modernizing real estate laws in Egypt, with the goal of securing transactions and restoring a balance between the protection of tenants' rights and property rights. The amendments also include a revision of contractual procedures, imposing transparency and information obligations on landlords and tenants to prevent abuses and enhance housing management.
Conclusion
The new law seeks to better regulate the real estate market, but treats old leases in a way that preserves some tenant rights while taking steps to develop the relationship between lessor and lessee.
This reform represents a key step in improving the efficiency of the Egyptian rental market by ending outdated practices and enabling better utilization of available housing.
Comentarios